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El Paso, Duke make bold moves into Nova Scotia offshore U.S. pipeline giants compete for supplies in basin which has an estimated 54 trillion cubic feet of reserves and the prospect of faster development than Arctic regions Gary Park PNA Canadian Correspondent
Two U.S. pipeline giants, Duke Energy Corp. and El Paso Corp., are leading a charge to secure Canadian natural gas supplies, betting a combined C$3.2 billion in the past week on Nova Scotia’s offshore.
Although a race has not been officially declared, El Paso has raised the stakes by estimating Canada’s East Coast could be delivering 5 billion cubic feet per day, matching what most forecasters think could be the combined output from the North Slope and Mackenzie Delta.
The East Coast is also positioned for much quicker development than the Arctic, with PanCanadian Energy Corp. set to bring the region’s second field into production by late 2004 or early 2005.
Its C$1 billion Deep Panuke project is scheduled to start pumping at 400 million cubic feet per day and last eight to 12 years without any further discoveries. Scotian Shelf in infancy The Scotian Shelf, with projected recoverable reserves of about 54 trillion cubic feet around Nova Scotia’s Sable field, is still in its infancy.
The Sable Offshore Energy Project consortium headed by ExxonMobil Corp. was first on stream in late 1999 and is now capable of shipping 600 million cubic feet per day to New England and Atlantic Canada.
The region is also the target for a new wave of exploration. Shell Canada Ltd. plans to spud a C$65 million exploration well in shallow waters early in November; Marathon Oil Co. will start a deepwater well next month on the Scotian Shelf; and Chevron Canada Resources hopes to drill one well east of the Scotian Shelf next summer.
In addition, Calgary-based junior Canadian Superior Energy Inc. said it plans to drill later this year on the Scotian Shelf where it acquired 660 miles of seismic this year and another 420 miles in the immediate area.
Others among the companies with more than C$1 billion in total exploration commitments include Kerr-McGee Oil and Gas Corp., BP Energy and PanCanadian Energy. Pipelines a vote of confidence But the arrival of the pipelines is seen as the strongest vote of confidence yet in the area and the beginning of a new era in Canada’s pipeline sector, which has been dominated for decades by domestically controlled TransCanada PipeLines Ltd., Enbridge Inc. and Westcoast Energy Inc.
Duke fired the opening shot in late August with its blockbuster $8.5 billion bid for Westcoast, a takeover that will make it the first pipeline with continent-wide infrastructure on both sides of the Canada-U.S. border.
The deal would also double to 75 percent Duke’s stake in Maritimes & Northeast Pipeline, which is the only gas transmission system from Canada’s East Coast.
El Paso followed on Oct. 4 by announcing it is going ahead with plans to spend up to C$2.4 billion on a 720-mile pipeline shipping gas from Nova Scotia’s offshore to fresh markets in New York and New Jersey. The link would be Canada’s first subsea system.
Two days later, Duke said it would spend C$750 million to expand the Maritimes & Northeast system to the Boston area, more than doubling current capacity to 1.3 billion cubic feet per day by 2006 and eventually to 1.7 billion cubic feet per day.
A $380 million expansion of the 650-mile Maritimes & Northeast system is already scheduled for completion in 2004. New line projected to come on in 2005 El Paso and Marathon have studied the pipeline project, dubbed Blue Atlantic Transmission System, since last spring and hope to have the line completed by late 2005, coming on stream at 1 billion cubic feet per day.
Jay Holm, chief executive officer of El Paso’s Eastern Pipeline Group, said a subsea pipeline is an “ambitious project,” but offers a number of advantages over a land-based system, including minimal environmental impact and lower transportation costs for producers.
An El Paso spokesman said that in studying the exploration activity, his company was “confident that the reserves are there” to support construction of a pipeline within the time frame established.
Even without the confirmation of new discoveries, putting the pieces in place makes sense, said Gord Currie, an analyst with Canaccord Capital Corp. in Calgary.
“El Paso’s move looks like it is pre-empting the competition,” he said. “If you have a year or two over anyone else in regulatory filings, then you’re that far ahead in the race.” Williams also weighing a line Another big U.S. pipeline player, Williams Companies, is also weighing the prospect of building a pipeline from the Nova Scotia offshore to the U.S. Northeast, said Mike Hantzsch, vice-president of business development with the company’s Canadian unit.
He said Williams may also develop plants in Nova Scotia to extract gas liquids for sale in cities and possibly for petrochemical development.
To boost interest in the region the Canada-Nova Scotia Offshore Petroleum Board is holding a bidding round on Nov. 1. Sixteen 16 wells have been drilled near or within the areas covered by the tendered parcels and more than 250 seismic programs have been conducted since 1969.
In its most recent assessment, the Canadian Gas Potential Committee said that new drilling on the Scotian Shelf could yield a “bonanza” of new reserves, thanks largely to PanCanadian’s Deep Panuke find of 1 trillion cubic feet last year.
The committee estimated the Sable sub-basin and Deep Panuke contained discovered resources of 10 trillion cubic feet of gas in place and 6 trillion cubic feet of nominal marketable gas.
The report also details two established and two assessed conceptual plays estimated to contain 27 trillion cubic feet of undiscovered gas in place and 11 trillion cubic feet of nominal marketable gas.
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